$Amazon.com(AMZN)$ (AMZN -2.92%) has long been a stock market darling, but 2022 has been a rough year for the tech giant. Its share price is down 40% year to date, and it just became the first publicly traded company ever to lose $1 trillion in value, a reflection of just how far the company and its FAANG stock peers have fallen.
While its recent performance has no doubt been frustrating for shareholders, there are still plenty of good reasons to buy Amazon today. Here are the top 10.
1. The e-commerce business will bounce back
E-commerce stocks were crushed this year, and Amazon was no exception. Through the first three quarters, the company's e-commerce segments lost more than $8 billion, and management expects its growth slowdown to continue in the fourth quarter, forecasting revenue growth of just 2% to 8%.
However, momentum in online retail will eventually return, and growth and profits will improve as well. The current slowdown largely reflects the pull-forward effect of the pandemic as online sales surged through much of 2020 and 2021. It's not a permanent state.
2. Amazon Web Services is still a rock star
It's become a bit of a cliche to argue that Amazon Web Services (AWS) is worth as much as Amazon's market cap, if not more. The numbers show why.
Through the first three quarters of 2022, revenue from the cloud infrastructure business jumped by 32% year over year to $58.7 billion, giving it an annual run rate of $75 billion, and its operating margin is now 30%. As a standalone entity, AWS would be one of the most profitable companies in the country.
It's true that its growth has slowed a bit, coming in at 27% in the third quarter. That was due in part to macroeconomic headwinds as its customers have become more concerned about controlling their spending, but AWS is still growing rapidly, especially for a business of its size.
3. The advertising business is booming
While nearly every digital advertising platform posted weak growth in the third quarter, Amazon's advertising revenues jumped by 30%. It's now the No. 3 digital advertising platform in the U.S. behind Google and Facebook, and it's on track to generate roughly $40 billion in revenue this year.
Its strong growth in this weak macroeconomic climate is a testament to the sticky nature of the business as third-party sellers depend on Amazon ads to sell their goods, and there's no other platform like it for them to go to.
4. It has the greatest customer loyalty program ever
Amazon Prime now has more than 200 million members around the world, and it's a big reason why Amazon's e-commerce business has been so successful.
Prime incentivizes spending on Amazon and blocks out competitors by leveraging its logistics network to provide free two-day shipping. The company continues to invest in Prime benefits, adding Thursday Night Football to its streaming video offerings, as it sees Prime as a key strategy for driving e-commerce growth.
5. It's about to get more profitable
Amazon's profits have lagged, and the company has long prioritized investing in long-term growth over making short-term profits. However, as the company matures, management seems to be recognizing that some costs have spun out of control, and that even a company that prizes experimentation can do too much of it.
In the last few months, Amazon has shut down Amazon Care, its telehealth and in-person healthcare business, and Scout, its delivery robot. And reports just came out that management plans to lay off 10,000 corporate workers in divisions including Alexa and other devices, retail, and human resources. That should help give the bottom line a boost.
6. Bezos is still in the building
Jeff Bezos no longer runs the company on a day-to-day basis. He passed those duties off last year to CEO Andy Jassy, who previously ran AWS.
However, Bezos is still the executive chairman and the largest shareholder, and Jassy regularly seeks his counsel. You can bet that any major decision at the company is going to include his input.
7. The economy will rebound
Amazon isn't a recession-proof company. Its e-commerce business is primarily built on sales of discretionary products, and cloud infrastructure and advertising are both sensitive to the business cycle as well.
Amazon's weak recent results and guidance stem in part from a set of macroeconomic challenges that will eventually dissipate. Additionally, the headwinds it faces internationally from the stronger dollar will fade, giving its revenue growth a boost.
8. The stock is well priced
It might be hard to call Amazon cheap based on its current valuation metrics, but the stock is well-priced, down around 50% from a year ago.
Fundamentally, the company isn't much different from what it was a year ago, though its growth has slowed and its profitability has waned. However, any number of catalysts could help restore growth and profitability, including the ones discussed above.
Once market sentiment shifts, Amazon should rebound rapidly.
9. Its competitive advantages are clear
Amazon is so powerful that the mere hint that it may enter another industry is often enough to send potential peer stocks spiraling. This year, for example, Shopify stock fell sharply, in part because of the threat from Amazon's new Buy with Prime program, which allows independent websites to sell products with Prime shipping.
Amazon's competitive advantages -- including Prime, its third-party marketplace, Fulfillment by Amazon, its vast warehouse network, and its reputation for customer satisfaction -- allow it to muscle into new industries. Those attributes also help explain why Amazon still dominates U.S. e-commerce with a market share of about 40%. Considering that it now faces competition from brick-and-mortar giants like Walmart, Costco, and Target, as well as tech platforms like Shopify, its ability to maintain that huge market share is no small feat.
10. More experiments are coming
There are still plenty of ideas in Amazon's pipeline that could yield big returns. Take Amazon Go, for instance. The company's "Just Walk Out" technology allows shoppers to buy products at Amazon's convenience stores without ever stopping at a checkout counter to pay for them. That's a level of convenience unmatched by conventional retailers.
The company has begun adding the "Just Walk Out" technology to Amazon Fresh supermarkets and even some Whole Foods locations, and that's just one example of how the company is inventing on behalf of the customer.
Amazon's commitment to invention and experimentation is central to its corporate culture, and that, along with its prowess in businesses like e-commerce and cloud computing, will drive its success in the future.
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